Through TheFLY's Eyes: Phelps Dodge Corporation

from Theflyonthewall.com







Phelps Dodge To Acquire Inco, Falconbridge Ltd. For $40 Billion

Phelps Dodge (PD) announced this morning that it is acquiring Inco (N), Falconbridge (FAL) for $40 billion. To this Fly, this sounds like JDS Uniphase (JDSU) acquiring SDL, Inc. all over again.

In 2000, JDS Uniphase, the ultimate commodity stock of its time (optical components) agreed to buy another bubble stock, European-based SDL, Inc., for $41 billion. The combination of SDL and JDS Uniphase supported a market cap over $100 billion. What is the market cap of the combined company today? $4.5 billion. Now that's the way to create shareholder value!

The Quotes are Always the Same

"We believe that joining our two companies allows us to provide many benefits for our customers," added Don Scifres, CEO and President of SDL. "With our increased technological expertise and the economies of scale, we believe that we will now be able to offer our customers new innovative product offerings." - July 2000

J. Steven Whisler, chairman and chief executive officer of Phelps Dodge Corporation said: "The combined company has one of the industry's most exciting portfolios of development projects, and the scale and management expertise to pursue their development successfully." - June 2006

JDS Uniphase did the deal at a sector peak, just as Phelps Dodge is doing as copper prices come off historic highs.

The JDS Uniphase-SDL deal lost 95% of its value since consummation. Will the new Phelps Dodge Inco do the same? Most likely not. But looking at Phelps Dodge's insider transactions on Yahoo!, no insiders are buying. That says it all! These large deals at sector peaks always lose shareholders money. This is a classic sign of an industry top.